Embattled industrial giant General Electric announced Thursday, December 7, it would cut approximately 12,000 blue collar and white collar jobs in its GE Power unit, more than a fifth of the total, in a bid to cut costs.
It added that demand for new built power plants had "dramatically" dropped in all OECD countries. "Traditional power markets including gas and coal have softened".
GE, based in Boston, announced in November that it was slashing its dividend in half and that the conglomerate would narrow its focus to three key sectors - aviation, health care and energy.
GE cited a changing power market as part of the reason for the move. American Electric Power's quarterly revenue was down 12.8% compared to the same quarter previous year. But it has been revamped since then, merging with GE's Energy Connections division and selling water assets and other operations.
"This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services", GE Power chief executive Russell Stokes said in a statement. He said the company anticipates those challenges continuing.
John Flannery, who took over the helm at General Electric (GE) from Jeffrey Immelt in August this year, wants to make GE more efficient. General Electric Company (NYSE:GE) has declined 4.46% since December 7, 2016 and is downtrending. Rival Siemens is cutting about 6,900 jobs, or close to 2 percent of its global workforce, mainly at its power and gas division, which has been hit by the rapid growth of renewables. The deal was a big bet on coal-fueled power, almost doubling GE's fleet of large turbines in coal plants to more than 1,500 world-wide.
GE is cutting 12,000 in its power business around the globe - 18 per cent of the division's workforce - with 1,100 of those in the United Kingdom, mainly at the former Alstom operation in Stafford and at Rugby. The company still expects to meet its obligations to the French government under the Alstom deal, which included a promise to create 1,000 high-skilled jobs, the person said.
"The announcement by GE that it wants to cut thousands of jobs across Europe is neither strategically nor economically justifiable, and serves only to maximize short-term profit for shareholders", said Klaus Stein, a union representative at GE's plant in Mannheim, according to Reuters.
As the size of the hurdles became clear this year, GE made changes to management in the power business and reorganized divisions. Solar-panel manufacturing is dominated by Chinese companies. BMO Capital Markets maintained General Electric Company (NYSE:GE) on Thursday, March 23 with "Hold" rating. It hopes to reduce costs by $1 billion next year.
GE said it had begun talks with labour leaders about the steps. Cardinal Capital Management holds 1.26% of its portfolio in General Electric Company (NYSE:GE) for 460,440 shares.
American Electric Power Company Inc (NYSE AEP) opened at $76.73 on Thursday.